Import of Vehicles

Import Of Vehicles Taxpayer’s Facilitation Guide

This brochure provides basic information for the benefit and use of taxpayers importing vehicle to understand their rights and obligations. The brochure explains in detail the conditions laid down in the Import Trade Policy and the structure of taxes under the Customs Act, 1969, Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Capital Value Tax on the import of vehicles.

Import of three years used cars allowed

In a major policy decision, the federal government has decided to allow import of three-year-old used cars in accordance with the previous policy on the demand of importers. This was confirmed by Prime Minister’s Advisor on Finance, Revenue and Economic Affairs, Dr. Miftah Ismail on Sunday while he was on board traveling to Amsterdam (Holland).

“The ECC has approved the previous procedure applicable before October 2017. Used cars will be released like in the past,” he added. According to recent data, imports of used cars and minivans surged to 65,723 units in 2017, up almost 70 percent from 38,676 units a year ago, latest data released by the auto industry shows.

The data further reveals that the arrival of sport utility vehicles (SUVs) also increased by 59pc to 7,758 units. Imports of pickups and vans registered a 9pc rise to 3,154 units.

The prevalent policy, import of used vehicles takes place under the gift, baggage, and transfer of residence schemes for the overseas Pakistanis who ship such vehicles individually. Unlike the commercial importers, the individual overseas Pakistanis are not updated on policy changes on daily basis. Consequently, a considerable number of consignments by the overseas Pakistanis were shipped after the issuance of SRO 1067(I)/2017 and have been stuck at the ports.

Earlier, there were reports that the ECC has deferred consideration of used cars summary due to the absence of Secretary Commerce, Younus Dagha who was in China heading an inter-ministerial delegation to review China Pakistan Free Trade Agreement (CPFTA) which is massively in favor of China.

However, on Sunday, Prime Minister’s Advisor confirmed that the ECC has taken a principled decision on used car import policy. “We are going back to the previous rules and a new committee has been formed to study the matter,” he continued. When asked does this mean the recent changes in used cars import policy are scrapped, he replied “yes”.

On October 6, 2017, Economic Co-ordination Committee (ECC) of the Cabinet had approved that all vehicles in new condition be imported under transfer of residence, personal baggage or under gift scheme, the duty and taxes will be paid out of foreign exchange arranged by Pakistani nationals themselves or local recipient supported by bank encashment certificate showing conversion of foreign remittance to local currency.

The decision of the ECC was notified by the Commerce Division vide SRO 1067(I)/2017 on October 20, 2017. The Import Policy Order provides protection to the shipments in the pipeline against any abrupt policy changes. Para 4 of the IPO-2016 provides that amendments brought in this order [IPO-2016] from time to time shall not be applicable to such imports where Bill of Lading (B/L) or Letters of Credit (L/C) were issued or established prior to the issuance of amending the order.

The used cars importers rejected amendment in policy, saying that with this decision, the government has destroyed their business. They held meetings with senior officials and have reportedly written letters.

Dr Miftah Ismail, who hails from Karachi, the hub of imported used cars, in a letter to Commerce Minister had suggested that new requirement be given effect for vehicles arriving after February 28, 2018, when the importers would be required to pay duties at the higher of the inter-bank and open market foreign exchange rate. Commerce Ministry has proposed to the ECC that those vehicles may be cleared by the customs authorities where the bill of lading was issued on or before January 9, 2018.

As the Cabinet Division issued minutes of the ECC meeting, Commerce Division will issue a revised SRO replacing the existing one issued last month.